Adam J. Levitt, founding partner of DiCello Levitt. Courtesy photo
Last year, U.S. District Judge Brian C. Wimes of the Western District of Missouri approved a $500 million settlement in the T-Mobile data breach litigation, finding that the “historic” settlement extended “extraordinary” relief to the class. In re T-Mobile Customer Data Breach Litigation, Case No. 21-MD-3019 (W.D. Mo. June 29, 2023). On appeal, the U.S. Court of Appeals for the Eighth Circuit agreed—and the appellant objectors did not even dispute—that class counsel had “represented the class well” and “obtained a significant result.” In re T-Mobile Customer Data Breach Litigation, Nos. 23-2744 and 23-2798 (8th Cir. July 29, 2024). Nevertheless, the Eighth Circuit overturned the $78 million fee award, deeming it a “windfall,” because class counsel had not, in its view, logged a sufficient number of hours to justify a roughly 16% fee.
The Eighth Circuit offered two main reasons for its decision: first, that many attorneys will still take these cases even with a lowered percentage, and second, that awarding high multipliers early in a case could encourage counsel to settle early and move on to the next case. Id. at *6-7. The flaw in both of those arguments is that it assumes the historic result was inevitable and that any lawyer would have achieved the same. It is incorrect to assume that lawyers are fungible, or that a large settlement will be available early in the case regardless of the skill of the attorneys involved. Corporate defendants shelling out thousands of dollars per hour believe that paying for top talent will get them the best result, even though they could find others to take their case at much lower rates. One of the main reasons any client chooses a contingent fee arrangement, in addition to shifting the downside risk from client to lawyer, is that the attorney gets paid according to the quality of the results, and, therefore, better aligns the incentives between attorney and client. Thus, trial courts should be afforded the deference and focus primarily on the result achieved for the client (here, the class), just as in any other contingent arrangement.
